Group of International Communists

Fundamental Principles of Communist Production and Distribution


Translated and Edited by Mike Baker: published by the Movement for Workers' Councils, London 1990.
Marked up by Jonas Holmgren for the Marxists Internet Archive.

Table of Contents:


Average Social Production Time as the Basis for Distribution


1. The Distribution of the Product According to Leichter

Even though it may have been Leichter's achievement to have tackled for the first time and in a serious way the question of social regulation and accounting control on the basis of average social labour-time, he nevertheless fails to bring the various problems to a satisfactory conclusion. The main reason for this is that his approach to the question of the distribution of the social product remains wholly within the sphere of influence of capitalist modes of thought. It is self-evident that an antagonistic mode of distribution of the product has as its essential precondition a system of domination over the producers, and this in its turn provides the basis for Leichter's concept of a central organ of administration and management. Thus it is possible to characterise Leichter's attempts in this field as being based upon the conception that the foundations of communism do indeed rest upon a system of production which is controlled by average social labour-time, but one in which this is also administered from above. If indeed we have already demonstrated Leichter's belief that exploitation can in no way be avoided, in the same way we will now go on to prove the necessary corollary of this, namely, that the producer must of necessity lose every right of disposal over the system of production. And all this arises simply because he is unable to accept the average social hour of labour as the unit measure regulating distribution as well as production.

In a society characterised by specialisation of labour, the producers must receive a permit authorising the consumption of goods socially produced but destined for individual consumption. In this respect these authorisations fulfil the same function as money under capitalism. Intrinsically, however, this is simply worthless material; it may be paper, aluminium or any other stuff.[1] The worker receives in the form of these permits just so much as corresponds with the actual labour-hours expended. In common parlance, these permits are called "labour money", although it does not constitute money in the capitalist sense. Without for the moment involving ourselves in complex theoretical observations, we may state that this "labour money" corresponds fully with marxist concepts:

"On this point I will only say further that Owen's 'labour-money', for instance, is no more 'money' than a theatre ticket is. Owen presupposes directly socialised labour, a form of production diametrically opposed to the production of commodities. The certificate of labour is merely evidence of the part taken by the individual in the common labour, and of his claim to a certain portion of the common product which has been set aside for consumption."[2]

Leichter in his observations also proposes this "labour-money" as the basis for distribution. He writes:

"In reality the social plan proposed by Bourguin, as also that presented here, are both based on the concept of a distribution of goods in kind relative to the labour expended by each individual. Labour money is only a particular form for determining the share in the national product selected for specifically economic reasons."[3]

Although these observations of Leichter's appear to be quite faultless, there lurks nevertheless a poisonous adder in the grass, and this becomes apparent when he writes about "distribution in relation to the labour performed by each individual". Production is indeed organised on the basis of the average social hour of labour, but according to him distribution proceeds on the basis of quite different principles. In reality the producers shall have allocated to them products in exchange for their labour-power on the basis of norms which have absolutely nothing to do with any system of labour-time accounting. On the contrary, it is the social statistician and the subsistence physiologist who should determine the quantity and quality of life necessities which the human individual needs for the maintenance of life, and it is they who "fix a definite number of labour-hours which correspond approximately to the minimum necessary for existence" (page 64). It is by this means that the "standard scientifically estimated and balanced ration of life necessities" (page 64) is determined. This minimum ration, reflecting a physiological subsistence norm, then becomes the basis for payment. What possible connection is there between this and the system of labour-time accounting in production?[4]

The answer, of course, is that this minimum is intended for unskilled workers, whereas the "wage" of the "trained" and "skilled" workers is fixed at a somewhat higher rate by means of negotiated agreements. These collective agreements determine the basic wage, whilst "the socialist factory manager ... fixes the payment received by the separate workers" (page 64), according to their various capabilities.

It is clear that the producers can never feel that their factory is a part of their very selves when such contradictions exist between them. For that reason they can never bear the responsibility for the production process, something which Leichter knows full well. For this reason, in his conception it is not the producers themselves who exercise responsibility, not the works organisation as a productive whole, but it is the director. Leichter writes: "The director of the factory, however appointed, bears the sole responsibility for it; he can be summarily dismissed, just like a capitalist factory manager who fails to live up to the demands placed upon him. Should he then be unemployed, he receives the minimum income guaranteed by society, or else he is employed in an appropriately inferior, and for that reason lower paid, position. In this way it is possible to maintain standards of 'individual initiative' and a sense of responsibility - qualities which also affect personal self-interest - amongst the capitalist factory managers and directors, and so to place them at the disposal of the socialist economy" (page 101). All that is quite explicit. Leichter's conception is that the threat of relegation to a subsistence minimum based upon physiological or "minimum living standard" norms should hang over the heads of the producers like the sword of Damocles.

Thus we see that in this case also the organisational structure of production is determined by the foundations on which distribution stands. The workers have come into irreconcilable contradiction with the factory administration, and all this has happened because the workers have failed to ensure that their relation to the social product is determined by the labour which they contribute.

Let us now turn our attention to the prices of products as Leichter conceives them. Although we would have expected that in this case at least the social average production time would have been valid as the determinative basis for the prices of products, we find that in fact this is by no means the case. In this matter Leichter is extremely vague, but nevertheless it is clearly apparent that the products make their way into social exchange with a higher price attached to them. He speaks, for instance, of a profit increment, but shows that it is his intention that this should accrue, not to the factory, but to the general social fund - the equivalent in Leichter's scheme to a capitalist "treasury" or "exchequer". It is from this profit increment that the general fund makes available the means for the enlargement of the productive base of the industrial establishments. This fund therefore reveals itself to be an accumulation fund. We will return shortly to the question of this accumulation fund, but would first like to make it clear that, with Leichter also, production time finds no expression in the "price" of products. The truth then emerges - namely, that the "central management and administration of the productive system" in fact fixes the prices. In short, they conduct a price policy, in order amongst other things to obtain the means for accumulation. The central administration, which exercises the right of disposal over the product, thus has the power in its hands to exploit the producers as they see fit. Because of the lack of an exact relationship of the producer to the product, because of a presence of a "price policy", capitalist-type wage relations remain in force.

As is well known, marxist political economy defines three categories of wages in capitalist production: 1. the nominal wage; 2. the real or actual wage; 3. the relative wage.

The NOMINAL WAGE is the money price of labour-power. Under that type of communism based upon the statistically derived physiological or "minimum living standard" subsistence minimum, this is to be understood as the equivalent number of labour-hours which the worker receives as payment for the actual number of labour-hours, for instance 40, worked.

The REAL OR ACTUAL WAGE is equivalent to the quantity of products which can be realised in exchange for the nominal wage. Although the nominal wage may remain constant, the actual wage will be higher if the prices of products fall whilst it will fall if those prices rise. With Leichter, the central administration pursues a "price policy" which as a matter of course is assumed to be in the interests of the producers. But this does not in any way alter the fact that it is that authority which in reality determines the actual wage, in spite of any and all "collective agreements" reached, since these relate only to the nominal wage. Over all this the producer has no power whatsoever, because the right of control over the price policy is reserved for the gentlemen of the "Statistical Bureau".

The RELATIVE WAGE is defined by the relationship of the real wage to the gross capitalist profit. Thus it is possible that the real wage remains constant whilst the relative wage falls on account of a rise in the gross mass of profits realised. Here Leichter places the main emphasis upon the "rationalisation" of industrial establishments. This has its source in the striving after higher productivity, the creation of a continuously increasing surplus product with the same labour-power - in other words, the average social labour-time necessary for the production of commodities falls continuously. With Leichter, the objective relationship of the producer to the product is not determined in the production process itself. He is only capable of conceiving only of a kind of intelligent labour machine which is nourished on the basis of a statistically derived physiological or "minimum standard living" subsistence minimum, a machine which, in spite of the increase in the mass of products which its labour has created, nevertheless needs to receive no extra calories or other input of life necessities whatsoever. Or, alternatively, perhaps the labour machines do after all receive some part of the increased wealth, but even if this is so, it is in spite of the fact that not the slightest guarantee is given of this ever actually happening. The essential point here is that, under a system of labour-time computation, the owner-controllers of the production system, the workers themselves, exercise a complete right of disposal over the increased mass of products produced.

Thus it can be demonstrated that the category of social average labour-time is meaningless if it does not simultaneously function as the foundation of distribution. If the relationship of the producers to their product is directly anchored in the products themselves, then no leeway exists for a "price policy", and the fruits of each and every improvement in the productive system accrue directly and automatically to all consumers without any need for anyone to "decree" this administratively. The fact that, with Leichter, the three capitalist wage categories can be shown to exist proves that his production plan, just like capitalism itself, also rests upon exploitation.


2. Varga's State Communism as a Factor in Distribution

Leichter, however, is not the only one to seek his salvation in a "price policy": Varga also makes this the centre of gravity in a communist system of distribution. He differs only from his colleagues Neurath, Leichter, etc. only insofar as he approves in principle of a system of equal distribution of the social product. In the transitional period, it will not be possible to eliminate exploitation immediately, because we must expect that "a generation of workers would for a time exist which has been corrupted by capitalism, which has been brought up under the shadow of an acquisitive and egotistical capitalism",[5] and would set its face against an equal distribution of the social product. It is well-known that skilled workers tend to view unskilled workers with a certain contempt, whilst a perverted sense of justice tends to allot to the scions of the intellectual professions, such as doctors, engineers, etc., a larger share of the total product than that which accrues to the "ordinary" workers. Today one may consider this differentiation to be too extreme, but ... "an engineer nevertheless remains something different from a dustman"! To what extent the working class may in the course of the revolution come to discard this ideologically bolstered excrescence remains to be seen. One thing, however, remains certain: once the revolution is complete, this re-education must be carried through very swiftly, since an antagonistic mode of distribution of the product will always lead to rivalries and quarrels within the working class itself.

In the above mentioned text Varga has set down his experiences and theoretical observations concerning the Hungarian Soviet Republic. The history of Hungary is extremely important to the study of a communist economy, because it was here that the theory of state communism was first put into practice and that practice than hallowed as theory. In Hungary the attempt was made to construct communism according to the rules of the state-communist concept, and indeed under such favourable conditions that "the transformation and organisational restructuring of the economy proceeded faster and with greater energy in Hungary than in Russia itself" (Varga, page 78). Economic construction, indeed, proceeded according to the Hilferdingian vision of a "general cartel" (page 122), in which the State, as general manager and administrator of both production and distribution, enjoys the full right of disposal over all products. All commodities still produced in the "free" capitalist sector of the economy are now bought up by the State, whereupon the latter does indeed enjoy complete domination over the social product.

In the case of distribution, it was at first the pressing need to supply industry with raw materials and means of production which imposed itself as an urgent necessity. For this purpose the Supreme Economic Council had established a number of central distribution points for raw materials, which then allocated to the factories whatever quantities of raw materials and other means of production as seemed necessary and expedient to them. These central distribution points were, however, by no means simply organs of distribution; they operated simultaneously as instruments of political and economic power, since they consciously sought to promote the concentration of production through their control of materials supply. Factories which "higher authority" had decided to close down were simply cut off from the source of supply of essential materials, whereupon the operating staff were thrown onto the street. There is first hand evidence to show that the workers fought against such a process of concentration, which held the same fateful consequences for them as it did under capitalism. The very practice taught them the lesson that the producers held no rights of disposal over the system of production. This right remained in the hands of the state officials of the Supreme Economic Council, which later thus comes into irreconcilable conflict with the producers themselves (E. Varga: ibid., p. 71).

To this we would add the comment that concentration "from above downwards" apparently enjoys the virtue of being carried through more quickly than that "from below upwards", but the price to be paid for this accelerated development is the power the producers would otherwise wield over the system of production, that is to say: communism itself!

We have already noted that state communism of the Varga brand knows nothing of any economic scale of measurement determining the distribution of raw materials and means of production. The allocation of materials needed by industry for current production is carried out solely "by order of the relevant authorities" and is in no way determined objectively by the process of production itself. From the point of view of both social and economic policy, industrial production thus leads to a total fiasco. In social policy, because producers end up in a situation of total dependence upon those authorities which allocate the products; in economic policy, because under a system of distribution based upon subjective administrative assessments the needs of reproduction are not guaranteed. Varga is thus in essence a "commodity manager", who in the last analysis tends towards the system of centralised production and distribution advocated by Neurath, one which operates without any unit of economic control. Indeed he states that "for the time being the need for money prices and money wages exists", but is forced to add that this has to be overcome through a more plentiful production of goods. But then there remains absolutely no objective measure by means of which the growing productivity of the production apparatus may be evaluated. True planned production on any real basis then ceases, and it becomes impossible to measure and allocate as much product for the next production period as was used up in the previous one - i.e., to ensure even simple reproduction.

To overcome the chaos of state communism of the Varga variety, it would finally have become necessary to have established production upon the firm foundation of a unit of control, which by the very nature of the situation could have been nothing other than that of the average social hour of labour. But this would simultaneously have brought to an end any system based upon arbitrary allocation of the social product according to subjective administrative decision. As soon as the factories introduce a system by means of which their consumption is calculated in terms of labour-hours, according to the formula (p + c) + L, then the system becomes one in which the objective process of production itself determines how much product in the form of means of production and raw materials must be supplied to the factories for the next production period. With this system, the subjective element is eliminated along with the centralised power of disposal over the production apparatus, because management and administration of both production and distribution lie in the hands of the producers.

In Varga's system, the norms determining the distribution of products for individual consumption also reflect allocation according to subjective administration decision. Indeed, we cannot expect anything different, since production and distribution are functionally interconnected. The ideal which drifts vaguely before his eyes is "natural" allocation (i.e., by barter) without any economic measure, in exactly the same way as in the objective process of production. It is for this reason that he establishes for all consumers a fixed ration for the various staple products, which can then be obtained at consumers' cooperatives. "Since, however, money wages and money prices must for the time being remain in operation", we must now turn our attention to the problem of "the fixing of prices by the state" (Varga, page 147):

"At what level should the prices of state products be fixed? If goods produced by state enterprises were to be sold at cost price, there would be no economic resources available for maintaining the above-mentioned unproductive sections of the population. (This refers to military personnel, officials, teachers, the unemployed, the sick, invalids, etc. - the Authors). Also there would be no possibility of any real accumulation of means of production, which in the proletarian state is more urgently needed for the purpose of raising the standard of living of the inhabitants than in a capitalist one. It is for this reason that, in principle, all goods produced by state establishments should be sold at the 'social cost price'. By this we mean the cost price plus an additional increment to cover the cost of maintaining the non-productive section of the population, plus yet a further increment out of which real accumulation may be financed. (Varga's emphasis). Expressed otherwise, selling prices must be fixed in such a way that the state not only suffers no deficit, but actually disposes over a surplus out of which new productive installations may be financed. This, in principle, is the solution." (E. Varga: ibid., p. 147)


3. The Domination of the Producers by the Production Apparatus

The practice of "price fixing" resolves itself therefore into one in which the State conducts a "price policy". It is without doubt Varga's intention that this should be a class policy, which is why he then proposes a low price rating for products which are of considerable importance to the workers, such as bread and sugar, and a correspondingly higher rating for luxury products. It should be noted, however, that he considers these variations to have more a propagandist than an economic significance, since he knows perfectly well that the vast sums swallowed up by the State must in the last analysis come from the masses, i.e. from the proletariat.

This "class policy", however well-intentioned it may be, in fact reveals the entire rottenness of the state-communist method of distribution. It demonstrates very clearly that the producer has not -as through the very act of labour the producer should have - simultaneously determined a share in the social product, but that this share has been fixed in the higher echelons of the administration through subjective administrative decisions. As a result of this, the old political struggles for government posts are continued in a new form. The fact is brought quite clearly to light that whoever disposes of political power in the State at the same time holds the totality of the social product and, through the instrumentality of the "prices policy", dominates distribution. It is nothing but the old struggle for positions of power, which is fought on the backs of the labouring consumers. If, additionally, we bear in mind that wages also are fixed by the Supreme Economic Council (E. Varga: ibid, page 75), then the picture of state communist mass slavery is complete. The central administration of production has complete power to nullify any increase of wages achieved through struggle by means of their prices policy. Along with this, we also see that, with the construction of the state-communist system, the working class has laboured to create a system of production which then raises itself above and against the producers, and it grows into a vast engine of oppression against which it is even more difficult to struggle than it is against the capitalist system itself.

This relationship of rulers to ruled is given its appropriate disguise through the democratic forms assumed by the distributive organisations. For instance, on the 20th of March 1919 a Decree was issued in Russia which made it compulsory for the entire Russian population to be organised in consumer cooperatives:

"All those cooperatives which exercised a certain independence within their sphere of operations were then amalgamated into one organic whole, whilst the consumers controlled the process of distribution through their meetings and congresses; they were 'masters in their own house'. Although the initiating force behind the formation of consumer cooperatives and their amalgamation was the state, after the formation of the organisation the responsibility for the distribution of products was left to the population at large."[6]

According to the Russian Correspondence we are supposed to believe that it was solely through the organisational labour of the State that this colossal apparatus of distribution was set up within as brief a period as 5 months!

One thing however is certain: the dictatorship of the Communist Party in Russia has in this respect carried out a gigantic task, and has provided a glowing example of how consumers can erect their apparatus of distribution within a relatively short space of time. However, even if it be true that the consumers are "masters in their own house", the question as to how life under communism is to be conducted, and in particular how the relationship of the producer to the product is to be determined, is not decided there. These decisions are taken in the central government offices. The consumers may then distribute the product "independently" - provided, of course, that their "independence" is restrained to a sufficient degree to make it conform with the norms laid down by the price policy!


Table of Contents



[1] "...; it may be paper, aluminium or any other stuff".

Or, indeed, a plastic computer control card!

[2] K. Marx: Capital, Vol I; Penguin Books; Footnote to Chapter III, pp. 188-9.

[3] O Leichter: Die Wirtschaftsrechnung in der sozialistischen Gesellschaft, p. 75.

[4] Paragraph ending: What possible connection is there between this and the system of labour-time accounting in production?

Yet a further essential function of the labour certificate (or its computerised equivalent) is here revealed: that of ensuring that distribution for personal consumption takes place according to the same equal scale for each category of producer, and that, likewise, the benefits of rising labour productivity are passed onto each such category equally. As Fundamental Principles of Communist Production and Distribution clearly shows, it is by means of a system in which the conditions of distribution are determined by the conditions of production, and by such a system alone, that this aim can pertain as a natural and organic element of the entire economic process. The sole instrumentality through which this can be achieved is the wholly objective and impartial unit of distribution for purposes of individual consumption represented by the Average Social Hour of Labour.

[5] E. Varga: Die wirtschaftspolitischen Probleme der proletarischen Diktatur, p. 42.

[6] Russian Correspondence, (Imprecorr), 20th January 1920, quoted in: E. Varga, p. 126.